The 2018 tax filing season was one for the ages.  Taxpayers and their advisors experienced the first major tax law change in over 30 years, which left a lot of people either confused or frustrated.  Now that the 2018 tax filing season has been completed, we would like to share some observations we have seen over the past year.  Please see the following items we would recommend you review or do in the coming months:

YEAR END TAX PLANNING

The new tax bill, from a CPA firm view, was not the clearest when it came to how it was written and how things had to be reported.  With the amount of changes that occurred in the new tax bill, quite a few clients saw drastic changes in their tax return refunds or amounts due.  For this coming year end and the future, we feel tax planning is becoming more important than ever.  Consider some of the major events we saw from some of our clients over the past 12 months:

• Buying or selling a business
• Buying or selling real estate
• Cashing in IRA or retirement accounts
• Inheritances
• Large pay increases
• Large stock option exercises
• Major changes to investment account holdings
• New family additions
• Opening a new business
• Reviewing your current tax withholding – when the pundits say you will have more take home pay, that does not necessarily mean an increase in gross pay.That usually means a decrease in the withholding amount, which can increase your tax exposure at filing time.

If any of these events happened in 2019, it might be in your best interest to set up a tax planning appointment with us.  At a minimum, please let us know that something has happened so we can assist and ease some of the tax issues when the filing season begins.

ESTATE PLANNING

The new tax bill raised the personal exclusion for all taxpayers to very high amounts.  However, that does not mean estate planning is no longer needed.  The increased estate tax exclusion will most likely be reduced back down in the future, which means the exclusion now does not benefit you while you are living.  However, some things to address in this area may be:

• Are your powers of attorney (POA) up to date and current?
• Are your medical POA’s current?
• Are all your directives, that you would like to occur postmortem, listed and clear in your current trust and estate plan?
• Are there new additions to your family (children, grandchildren, spouses, etc.)?
• Have beneficiary designations been reviewed and are they current?
• If you have minor children, are the named custodians in your estate plan whom you currently want to care for your children in case of a catastrophic event?
• Has your trust and estate plan, whether recently revised or on schedule to be completed in the coming year, been properly funded?If not, the plan you have is worthless in many ways.

While the estate tax exclusion may be high currently, doing some of these above items will lay out a clear “roadmap” for your executors, the professionals they hire and will help to assist your estate’s assets in avoiding probate.

INVESTING

The investment world has changed drastically over the past few years, and the reporting of some of items has gotten very complicated.  Many of our clients now have access to more than the mainstream stock or mutual fund investments that used to be available.  These Alternative Investments are now more accessible than any other time before for a wider range of investors.  While we are NOT investment advisors, we recommend you “look before you leap”.  Please feel free to ask us to assist you with reviewing the statements or investment prospectus so that we may be able to assist in measuring the future tax exposure you may encounter.  In addition, you should feel free to ask your investment advisor some the following:

• If investing in master limited partnership (MLP), publicly traded partnerships (PTP) or alternative investments (AI), what are the fees to get into and out of the investment?
• What is the marketability for the MLP/PTP/AI that I may invest in?
• What will the additional state tax filing requirements be if I invest in these alternative investments?
• What is my rate of return?The increase in an account’s value is great, but the increase in value is not yours unless you sell your investment and realize the increase as a gain.
• Do not confuse the amount of yearly cash distributions with an investment’s rate of return.Sometimes, the cash distributions are a partial return of the monies you have invested.
• Losses from PTP/MLP/AI investments are not deductible (as they are considered passive activities for most investors) until there is either passive income or the investment is sold.
• Investing IRA/retirement plan monies in these investments may create Unrelated Business Taxable Income (UBTI), which may create a taxable event for your retirement investments.
• What are the fees that I pay for my account management (these fees are not deductible under the new tax law, so some annual statements no longer itemize them.However, it is your money and you should know the cost you incur annually for your investments)?

The above is merely a few items to help “jog your memory” and remind you some of these events may have future tax consequences.

Please call or email us as we may be able to assist in most cases, or at least at a minimum guide you to the professional most qualified to handle your specific needs and issues.